Category Archives: Economy

The Current Moment, with lucid commentary as always, has this to say about the Obama vs. Romney/Ryan race:

When Mitt Romney chose Paul Ryan as his running-mate the collective effervescence among various liberals was difficult not to notice.

[…]

There is just one problem with this, everybody is dancing around the same fire. The ‘issues,’ whatever exactly that means, are a narrow set of disagreements over one resounding consensus: how to reduce the deficit.

[…]

The Democrats and Republicans are disputatious members of the same tribe. The collective effervescence of the election is, above all, the reconstitution of elite consensus around a very limited set of differences on political economy.

My only problem is with this last bit, which seems to be yet another incarnation of the notion that there’s really no difference between Democrats and Republicans. This isn’t true, but it’s also false that there’s a world of difference between the two parties. For me, what it comes down to is this: there are many issues that, generally speaking, the Democratic and Republican parties and their voters disagree over. Abortion rights, tax policy, and, roughly speaking, levels of economic or environmental regulation and same-sex marriage. Yes, there is greater diversity of politics among the Democrats than the Republicans, and opinions and actions of the national parties don’t necessarily correspond exactly to the opinions of their constituents, but as generalizations I think these hold up pretty well.

The problem, as TCM points out with the deficit reduction issue, is that these differences of opinion coalesce around a very limited set of issues, and they’re only two among many possible opinions. Our current version of two-party politics means that there are many issues on which there is bipartisan consensus and many that are just never addressed at all by either party. And there are many other policy positions and possible solutions to social and political issues that are never raised because they lie outside the very limited realm of our two-party universe. (My friend Jacob has discussed problems with the two-party system at greater length here and here.)

Another way to look at this is to think about to whom these parties are responsive. Increasingly, both are gearing their platforms and their actions toward voters and organizations with money. There is some overlap in party support–many corporations, for instance, donate to both Republican and Democratic legislators in hopes of getting favorable laws passed either way–but there are definitely distinct groups of people who support one party or the other. But neither the Dems nor the Republicans are going to be responsive to the interests and preferences of a majority of Americans. (I don’t know how to put a number on this “majority,” but I will say that the median household income in the United States is somewhere between $45,000 and $50,000–i.e., half of all Americans make this amount or less–and the parties are generally not going to give a whiff about what any of these people want when it comes down to it.) Historically, politics, even nominally democratic politics, has almost always been an elite affair, excluding large chunks of the population from the process and the benefits thereof. So while there may be substantive differences between both main parties, these differences may not mean much to a majority, even a large majority, of Americans, to whom these differences mean relatively little.

Basically, I think discussions of the differences between the parties could use both a little more nuance and some perspective. Yes, there are substantive differences between the two parties, but would these differences, if implemented in policy, mean a lot to most Americans? In most cases and in general, probably not.

Be sure to check out Sociological Images‘ post on “Low-Wage Work in the U.S.,” which aggregates some good statistics about that topic.

Perhaps the most interesting part:

Finally, over at the Economic Policy Institute blog, David Cooper posted a table that provides an overview of the demographics of those who would be affected if Congress passed Senator Tom Harkin’s proposed bill that would raised the minimum wage to $9.80/hour:

Any legislation in Congress that has even a snowball’s chance in hell of helping the working class economically is almost certainly not going to pass. But a minimum wage hike looks to me to have a better chance than most bills, and if it helped almost 30 million individuals, even just a little bit, that could be a huge victory given the constraints of the current legislative climate. Better yet would be a bill that indexed that minimum wage to inflation or the cost of living, but these days even that seems a bit too much to hope for.

Optimistic as always about the rise of renewable energy, Juan Cole provides a new list of developments in this arena under the name of “Top Ten Reasons Fracking won’t Last Long.” All intriguing, but I was most intrigued by #7:

Algeria wants to go solar, aiming for 650 megawatts of solar energy by 2015 and a massive 22 gigawatts by 2030. The Desertec Foundation has big projects in Egypt and Morocco, and Algeria, an oil producer, has decided to join in. Theoretically, a small portion of the Saharan desert could power the entire world. Desertec plans to turn North Africa into a clean electricity-producing zone that could meet nearly a fifth of Europe’s energy needs. Algeria is eager to turn to renewables because its rapidly growing population is using more an more of its petroleum production, which is declining.

Cole has pointed out the same of other big oil producers like Saudi Arabia and even Iran. He argues that Iran is most likely pushing forward with refining its nuclear capacities not to make a bomb (though more on that, perhaps, another time) but to have an alternate source of energy so its own growing economy doesn’t suck up all its oil. Perhaps a strange byproduct of the world’s addiction to oil really will be a stronger move toward renewables, at least in some parts of the world.

THE Barclays interest-rate scandal, HSBC’s openness to money laundering by Mexican drug traffickers, the epic blunders at JPMorgan Chase — at this point, four years after Wall Street wrecked the global economy, does anyone really believe we can regulate the big banks? And if we broke them up, would they really stay broken up?

Most liberals in Washington — President Obama included — keep hoping the banks can be more tightly controlled but otherwise left as is. That’s the theory behind the two-year-old Dodd-Frank law, which Republicans and Wall Street are still working to eviscerate.

Some economists in and around the University of Chicago, who founded the modern conservative tradition, had a surprisingly different take: When it comes to the really big fish in the economic pond, some felt, the only way to preserve competition was to nationalize the largest ones, which defied regulation.

The other worthwhile part of this piece is a reminder that nationalization isn’t just some horrible sin that only bad people like Soviets have committed; it’s happened in the US, and not even that long ago:

We tend to forget that we did, in fact, nationalize General Motors in 2009; the government still owns a controlling share of its stock. We also essentially nationalized the American International Group, one of the largest insurance companies in the world, and the government still owns roughly 60 percent of its stock.

The author of this op-ed, Gar Alperovitz, presents nationalization mainly as a strategy to preserve competitive markets, but another potential benefit of this strategy could be accountability. Big corporations don’t answer to anyone but big shareholders and management, which is part of what makes them so dangerous. Nationalization could be a way to add some sort of democratic accountability to these firms. Of course, that depends on how democratic your government is, and the US government appears to be increasingly less so. But if you want an economy “of the people, by the people, and for the people”–and why not aspire to that in the economic realm if we do in the political?–some good strategies seem to be nationalization of some of the larger industries and some form of worker ownership/management of smaller and medium-sized firms. This latter approach, which often takes the form of worker cooperatives, has worked marvelously for Spain’s Mondragon Corporation and seems to be prospering among the Evergreen Cooperatives, of which Alperovitz happens to be a leading theorist and backer.

James Henry, former chief economist at consultancy McKinsey and an expert on tax havens, has compiled the most detailed estimates yet of the size of the offshore economy in a new report, The Price of Offshore Revisited, released exclusively to the Observer.

He shows that at least £13tn – perhaps up to £20tn – has leaked out of scores of countries into secretive jurisdictions such as Switzerland and the Cayman Islands with the help of private banks, which vie to attract the assets of so-called high net-worth individuals. Their wealth is, as Henry puts it, “protected by a highly paid, industrious bevy of professional enablers in the private banking, legal, accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy“. According to Henry’s research, the top 10 private banks, which include UBS and Credit Suisse in Switzerland, as well as the US investment bank Goldman Sachs, managed more than £4tn in 2010, a sharp rise from £1.5tn five years earlier.

[…]

“The problem here is that the assets of these countries are held by a small number of wealthy individuals while the debts are shouldered by the ordinary people of these countries through their governments,” the report says.

The sheer size of the cash pile sitting out of reach of tax authorities is so great that it suggests standard measures of inequality radically underestimate the true gap between rich and poor. According to Henry’s calculations, £6.3tn of assets is owned by only 92,000 people, or 0.001% of the world’s population – a tiny class of the mega-rich who have more in common with each other than those at the bottom of the income scale in their own societies.

Today Possible Futures posted a piece by Jedediah Purdy called “Rediscovering Politics,” the third in a series of articles about the Occupy Movement. The first two pieces in the series have criticized Occupy for an approach that emphasizes theatrics over meaningful political action and are well worthreading. Purdy’s piece is a fitting follow-up, noting that, for all its flaws, the Occupy movement revealed two important desires among the political disaffected: the “wish for democracy to be more immediate, engaged, and responsive” and the idea “that economic life has moral and political dimensions that we can’t afford to surrender to market logic.”

There’s more to the piece than these two claims, but I wanted to latch onto the second as particularly important. It seems to resonate with a bit from this essay, part of a collection published by The Scholar and Feminist Online called “A New Queer Agenda,” which claims the following:

The economy as such does not even exist as a fully concrete and discrete object of analysis. It is a historical invention, falsely abstracted from the operations of culture and politics more broadly.

It’s often noted that the “free market” is a reifying abstraction, but this claim is even more radical. It may be a bit too strong, but I find it refreshingly plausible. It clashes with a notion that has grown particularly prominent over the past three or four decades: that the economy is a sphere apart from society and politics, free (ideally) of cultural influences or moral considerations, that operates according to an internal “market” logic of efficiency and profit-maximization. On this view, such efficiency and the material prosperity are goods in themselves that are supposed to benefit everyone in a society in which such an economy exists. But as soon as political or sociocultural factors “intrude” on the working of the economy, this efficiency and productivity are compromised. Such obstacles are often seen as some of the worst ills that could befall a society.

But when you think about what the “economy” is, this view is absurd. Economic activity is, broadly speaking, about producing and circulating goods and services that people need and desire. But aren’t those needs and desires socially and culturally conditioned, and aren’t they determined by political situations? Firms and enterprises aren’t (or shouldn’t be) simply profit-maximizing machines. To name a few examples: coffee shops are places where people socialize and get work done; real estate agents should help people live in safe, comfortable environments; and lawyers should help maintain the rule of law, protecting the innocent and punishing the guilty (to use platitudinous language). All these activities are social activities, and to refer to them as economic is to look at them from a particular perspective–a legitimate perspective, but one that necessarily limits our understanding of how these activities work and what they’re for. When talk of “the economy” becomes too dominant, we start to think of “economic” enterprises primarily as means to make money and make our lives more efficient, often at the expense of our other social values and social goals. Profitability and efficiency are not, after all, intrinsically good; they are valuable only insofar as they advance our progress toward other goals, and when pursued for their own sake tend to erode community, democracy, and other important social structures.

I’m not saying we should abolish economics as a discipline or cease to speak of the economy as such, but I do think we should study the economy not as an isolated system but as a set of practices embedded in political, social, and cultural contexts. Scholars we remember primarily as economists or social scientists often saw the study of economics and society as inseparable–Adam Smith, for instance, wrote an ethical treatise called The Theory of Moral Sentiments, Max Weber’s work on economics is often disregarded because we remember him as a sociologist. But what these scholars studied is perhaps better understood as political economy, namely, the interrelated political and economic (as well as social, cultural, and other) activities that influence each other and cannot be understood properly in isolation. The study of political economy has been maintained by some scholars, but it’s time for it to once again become central to studying most, if not all, social activity.*

*A personal note: I’d like to attend grad school in History a couple years down the road, and I personally hope to address some of these very issues in my own study and research.

Last week I found and was enthralled by Willie Osterweil’s piece at TNI on “mystery shoppers.” The basic idea:

Mystery shoppers spy in retail stores, restaurants, movie theaters, banks, hospitals, bars, supermarkets, churches, doctors’ offices, public transit systems, gas stations, mechanics shops, gyms, funeral homes, universities — in short, anywhere the public is treated as a “customer.” Marketing firms hire “mystery worshippers” who pose as first-time congregants to evaluate church cleanliness, friendliness, and godliness. Mentally healthy people complain to psychiatrists of fake symptoms while carefully comparing the doctor’s behavior against a checklist. Last summer, a congressional scuffle over the federal government’s plan to send out elderly mystery patients made headlines, and while the measure ultimately failed, the U.S. has helped Pakistan deploy mystery shoppers in order to combat tax evasion.

The firms who hire these shoppers use their follow-up reports to assess the performance of employees or client companies, making sure they’re doing their jobs exactly as they’re supposed to. What these firms do with this information varies: some use it to create incentive programs to encourage better performance, and others use it as grounds for firing low-performing employees. But there’s not really any data about exactly how these data are put to use by mystery shopping companies.

The overall effect this has, as Osterweil astutely notes, is to increase general feelings of surveillance and paranoia in a way that ruins class solidarity, dividing working-class individuals (often women) against working-class people in the service sector. This passage sums up his point well and is probably my favorite of the piece:

Producing identification with the bosses; smashing labor; and making solidarity difficult through contract labor, precarity, and remote working are key features of neoliberal workplace organization. But central to this vision, too, is workplace surveillance. Jay Gould, ninth richest man in American history, railroad speculator, and widely despised robber baron, famously remarked upon the hiring of strikebreakers, “I can hire one-half of the working class to kill the other half.” Neoliberalism allows for the return of the robber barons by producing the technologies and techniques to replace Gould’s “kill” with “watch.” Heightened workplace surveillance helps build a workplace where no time is wasted, where all effort is put directly into the production of the bosses’ product. But it transforms more than just the bottom line.

It’s this that really drives home the old saying that the more things change, the more they stay the same. Capital has always had the means to pay off strike-breakers, fake protestors, and others to secure their interests on the ground. Solidarity and large-scale coordinated action by labor is hard enough on its own, and when capital actively works to dissolve these alliances, it can seem almost impossible. I hear that the most difficult thing about labor organizing is building solidarity that’s so strong it can, at times, overcome that sense of fear and paranoia. Mystery shopping is one of many practices that both spoils the quality of service workers’ lives and makes labor organizing more difficult.

In that vein, I want to recommend three good pieces I’ve read lately:

(1) Corey Robin’s Challenge to the Left, which alerts left-leaning intellectuals to the enormous difficulties of organizing;

(3) This post by Doug Henwood on the recent recall election in Wisconsin, the end of which argues that once a strong labor movement is on its feet, its primary goal should not be better contracts in the workplace (though these are important) but increased public benefits, provided by the state, that benefit everyone.

The green line, here, should not be able to simply go up and to the right indefinitely. While market failures clearly happen all the time, things are really bad when they persist for this long. And what you’re looking at, here, is a market failure, as Brad DeLong explains: what we’re seeing, he says, is nothing less than “a massive failure of our economic institutions”.

The first reason betrays a lack of trust that governments can and will do the job that they learned how to do in the Great Depression: keep the flow of spending stable so that big depressions with long-lasting, double-digit unemployment do not recur. The second reveals the financial industry’s failure adequately to mobilize society’s risk-bearing capacity for the service of enterprise.

Basically, we have low bond yields because the Fed has failed to do its job, and persuade the markets that it is capable of engineering a healthy economy over the long run. And we have high stock yields because the market has failed to do its job, which is to treat high corporate earnings as a fantastic opportunity to invest in the economy and build something even greater in the future.Just look at the amount of money which is flowing straight to corporations’ bottom lines, and not being put to good, productive work. Corporate profits now account for significantly more than 10% of GDP: that’s never happened before.

Salmon’s proposed solution is massive stimulus, and he thinks the 2012 election should be “a referendum between two visions of America,” with a left-liberal Obama advocating stimulus to heal the economy and Romney advocating a solution purely based in the private section. But, he laments:

Sadly, the lines won’t be drawn nearly that cleanly: Obama is bizarrely reluctant to talk about anything which rhymes with “stimulus”. As a result, the current dysfunction — and horribly weak jobs market — is likely to persist for far too long.

But this isn’t so mysterious. I don’t have opinion poll numbers, but the idea of “stimulus” may not be so popular among moderate or undecided voters Obama’s looking to pick up in the election, and that might contribute to his reluctance to talk about it, let alone engage in stimulus. Not to mention that the president’s big-money donors probably aren’t such big fans of stimulus, either. Obama himself may well think that stimulus isn’t the best or most appropriate measure at this point, especially with his more hawkish turn on the budget over the past couple years. All of that serves to collapse much of the distinction between Obama and Romney on how to deal with the crisis. Unless something surprising happens, we aren’t going to see the referendum Salmon is looking for in November, and the economic crisis is going to continue.

Quick! Everyone freakout! It’s a bad monthly jobs report. I guess liberalism is doomed, Obama is a failure, and Mitt Romney’s ascent to be the Greatest President Ever is assured [WSJ]:

WASHINGTON—U.S. job growth slowed sharply in May, the latest indication that the economy has lost momentum.

Nonfarm payrolls grew by a 69,000 last month, the Labor Department said Friday, the smallest gain in a year. The unemployment rate, obtained by a separate survey of U.S. households, ticked one-tenth of a percentage point higher to 8.2%, the first increase in nearly a year.

Economists surveyed by Dow Jones Newswires expected a gain of 155,000 in payrolls and for the jobless rate to remain at 8.1% in May.

Compounding an already weak report, March and April payroll gains were revised down. Nonfarm payrolls increased by 77,000 in April, compared with the previously reported 115,000, and March payrolls grew by 143,000 versus a previously reported 154,000.

The unemployment rate has fallen sharply since August, when it was 9.1%. But even though companies are hiring, the pace of job creation remains well below figures at the start of the year—the economy added an average of 226,000 jobs a month in the first quarter.

Nearly three years after the recession ended, the economy has failed to gain traction amid broad uncertainty related to Europe’s debt crisis, the potential for steep U.S. tax increases and spending cuts next year, and signs of slower growth in developing countries.

Federal Reserve officials have said they expect only gradual improvement in the U.S. labor market the rest of this year. The Fed is forecasting an unemployment rate somewhere between 7.8% and 8.0% by the end of 2012.

If the labor market stalls, the Fed could reconsider measures to stimulate the economy.